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Crypto climbs, stocks gain as markets cheer a weak dollar

May 25, 2021, 8:33 AM UTC

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Good morning, Bull Sheeters.

U.S. futures are gaining as a risk-off mood lifts everything from Chinese banks stocks to tech futures to crypto. Why so upbeat? Investors seem to be buying the central-banker-talk that rising prices are indeed “transitory.” At last check, the handle on the 10-year Treasury note was below 1.60%.

In today’s essay, I dig into the weak dollar, and what kind of boost that may give stocks in the quarters to come.

But first, let’s check in on the rest of the markets action.

Markets update


  • Asia is gaining ground with the Shanghai Composite up 2.4% in afternoon trade.
  • China’s benchmark CSI 300 Index has risen to its highest level in more than two months, helped by a rally in consumer and financial stocks.
  • The U.S. State Department slapped a Level 4 travel health advisory, urging Americans not to travel to Japan as further pressure is on the country to call off or postpone the Tokyo Olympics.


  • It’s a risk-off day in Europe too with the European bourses higher out of the gates. The Stoxx Europe 600 gained 0.3% in the opening minutes.
  • The property market is crazy-hot everywhere, which brings us to… Europe’s biggest ever real estate deal was clinched this morning with German residential property firm Vonovia acquiring rival Deutsche Wohnen SE for €19 billion ($23 billion).
  • Good news on the vaccine front: the Pfizer-BioNTech and AstraZeneca jabs have proven effective against the worrisome so-called Indian variant of COVID-19, a Public Health England study revealed yesterday.


  • U.S. futures are climbing again this morning. That’s after all three major averages started the week in the green, with tech leading the way higher.
  • Speaking of Big Tech… shares in Amazon are flat in pre-market trading with the e-commerce giant expected to announce as soon as today a $9 billion deal to buy Metro-Goldwyn-Mayer, the movie studio behind James Bond films.
  • Here’s a bullish call for crypto bulls: Goldman Sachs has initiated coverage of Coinbase with a “buy” rating and a $306 price target, which is a good 36% above its closing price yesterday.


  • Gold is down, trading below $1,880/ounce.
  • The dollar is lower this morning. That’s good news for stocks.
  • Crude is higher with Brent trading above $68/barrel.
  • The crypto board is a blur of green this morning with Bitcoin trading around $38,000, thanks to an Elon Musk-led rally. It’s up 15% in the past 24 hours. However, it’s still down 15% in the past week.


The dollar-stock club

King dollar is in a rut. The greenback has fallen 12% since its March 2020 high.

That’s not great news for U.S. expats and the trickle of American tourists abroad, but it’s generally good news for U.S. stocks—particularly multinationals.

According to Goldman Sachs, S&P 500 companies racked up $12 trillion in sales last year, with 28% coming from customers abroad—nearly flat, incidentally, on the 2019 haul. The standout sectors for foreign sales are information technology and materials. Both get more than half their sales from customers abroad.

This is important to keep in mind as Wall Street is all but writing off the dollar for the rest of 2021, and next year too. A weak dollar, as you know, will be a tailwind for a certain group of companies—foreign-facing stocks, as Goldman calls them. I’m calling them “the dollar-stock club.”

“Although domestic-facing stocks have outperformed alongside the vaccine rollout in the U.S., stocks with high domestic sales exposure will likely lag those with high foreign sales exposure during the coming months as the pace of global economic recovery surpasses that of the U.S.,” writes Goldman Sachs chief U.S. equity strategist David J. Kostin.

Kostin continues: “Looking ahead, the structural decline of the U.S. dollar and the acceleration of global growth relative to the U.S. should benefit global-facing US companies relative to domestic-facing stocks.”

Here’s why:

Goldman sees the global growth script flipping as soon as this quarter. U.S. growth is expected to peak imminently, with GDP surges in Europe and Japan expected to trend higher well into Q3. Goldman also expects dollar weakness to continue until—yikes—2024.

If that holds true, it bodes well for the dollar-stock club. Those companies should outperform, Goldman believes.

Given this analysis, which sectors are best positioned to outperform from a weaker dollar? Tech and materials top the list, as I note above. Here’s the rundown of the other sectors in the “dollar stock club”:

Before you start recalibrating your portfolio, there’s a big if that must be added to this analysis. So hold on to your bowl of Cheerios, I have to give the following advisory:

The following paragraph contains the T-word. If small children are within earshot of you reading this, hold their ears, or distract them with cryptocurrency historical pricing charts.

Okay, are we ready?

Goldman’s Kostin issues the following warning:

“The specter of tax hikes represents a key risk to global-facing companies. President Biden’s current tax plan proposes hiking the foreign income tax from 15% to 21% and instituting a minimum corporate tax rate of 15%. All else equal, a foreign income rate hike would adversely affect global-facing companies. However, there is still significant uncertainty around which hikes will ultimately be passed into law. Our economists expect tax legislation will be enacted later this year that will lift the foreign tax rate, among other changes, but only to roughly half the degree proposed in the Biden Plan,” he writes.

Okay, you can take your hands off their ears.


Bernhard Warner

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Today's read

Green crypto. There's a lot of buzz behind Chia Network, the digital currency platform founded by BitTorrent's Bram Cohen. The crypto upstart has raised $61 million from an impressive lineup of VCs, and now it's looking to IPO later this year.

Lumbering along. To all the Bull Sheet readers who've emailed me for more lumber news, this one's for you: futures prices on lumber have fallen off in the past two weeks, suggesting we've hit some kind of peak in the market. "But don't expect to find a lumber discount in the aisles of Home Depot or Lowe's just yet," writes Fortune's Lance Lambert. Here's why.

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Market candy

Quiz time

We've seen a bit of a tech-led bounce in the past week, which brings me to a favorite quiz question: If energy is the top-performing sector in the S&P 500 so far this month, what's the new No. 2? 

  • A. Financials
  • B. Materials
  • C. Consumer Staples
  • D. Info Technology

Hint: it rhymes with planks... as in banks. Financials have overtaken materials as the commodities rally has cooled off some. The top three (energy/finance/materials) are having an exceptional month. 

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